August 1, 2023

RBI Cuts Inflation Projection for FY24, Retains 6.5% GDP Growth Forecast

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) recently announced its decision to reduce the inflation forecast and maintain the same GDP growth forecast for the fiscal year 2023–24. These adjustments reflect the central bank's commitment to balancing inflation control with supporting economic growth. 

Inflation Forecast

The MPC revised its inflation projection for 2023–24 from 5.2% to 5.1%. The committee highlighted that the headline inflation trajectory will be influenced by food price dynamics. The arrival of wheat in mandis and procurement activities are expected to lead to a correction in wheat prices. Also, milk prices are likely to remain under pressure due to supply shortfalls and high fodder costs. The projection assumes a normal monsoon, with quarter-wise CPI inflation estimates of 4.6% in Q1, 5.2% in Q2, 5.4% in Q3, and 5.2% in Q4.

Retail inflation recorded an 18-month low of 4.7% in April. This was measured by the All-India Consumer Price Index (CPI). This decline was attributed to favorable base effects, coupled with easing food group inflation. Cereals, eggs, milk, fruits, meat and fish, spices, and prepared meals experienced moderation in inflation, while edible oils witnessed deflation. In the fuel group, LPG, firewood, and chips prices decreased, and kerosene prices slipped into deflation. Core inflation, which excludes food and fuel, also dipped due to lower inflation in clothing and footwear, household goods and services, health, transport and communication, personal care and effects, and recreation and amusement sub-groups.

GDP Growth Forecast

The MPC maintained its GDP growth forecast for the fiscal year 2023-24 at 6.5%. Factors supporting this projection include higher rabi crop production in 2022-23, expected normal monsoon conditions, and sustained growth in the services sector. According to the MPC, private consumption and overall economic activity are expected to benefit from these factors. The government's focus on capital expenditure, moderation in commodity prices, and robust credit growth are anticipated to foster investment activity. However, weak external demand, geoeconomic fragmentation, and geopolitical tensions pose risks to the economic outlook.

The quarterly GDP growth estimates for 2023-24 are as follows: 8% in Q1, 6.5% in Q2, 6% in Q3, and 5.7% in Q4. The projection underscores the continued expansion of India's economy, although at a slightly slower pace in the later quarters of the fiscal year.

World Bank on Indian Economy

The World Bank said India will remain the fastest-growing economy in terms of both aggregate and per capita GDP among the largest emerging markets and developing economies. However, it revised downward its GDP growth forecast for India in the fiscal year 2023-24 from 6.6% in January to 6.3% in April. The slowdown is attributed to factors such as constrained private consumption due to high inflation and rising borrowing costs, as well as the impact of fiscal consolidation on government consumption.

According to the World Bank, it expects India's GDP to grow at 6.4% in FY25 and 6.5% in FY26. Although India's growth in early 2023 remained below pre-pandemic levels, our country's economic prospects are expected to improve as inflation is controlled and borrowing costs are managed.


The MPC's decision to lower the inflation forecast for FY24 demonstrates its commitment to ensuring a gradual alignment of inflation with the target while supporting economic growth. The projections take into account various factors such as food price dynamics, monsoon conditions, and government initiatives to boost consumption and investment. While risks persist due to weak external demand and geopolitical tensions. Our country’s economy remains resilient and is expected to maintain a steady growth trajectory.


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